Hindustan Aeronautics (HAL) share worth has soared 40 per cent to this point this yr, outperforming benchmark Nifty 50 which has tanked round 10 per cent. Analysts at ICICI Securities are bullish on the defence PSU inventory and see as much as 51 per cent additional rally going ahead. According to the brokerage, HAL’s exports may even see robust progress going ahead. At the identical time, the corporate may also profit from the ‘Make in India’ initiative within the defence sector. The inventory was buying and selling marginally greater on Thursday at Rs 1,729 on BSE. Note that for the monetary yr 2021–22, the corporate introduced a 400% fairness dividend or Rs 40 per share, for the fiscal yr ended March 2022. ICICI Securities has a ‘buy’ name on the inventory with a goal worth of Rs 2,618 apiece.
Investment Rationale
$5.5 billion+ export alternative from Malaysia, Egypt and Nigeria airforce tenders
Analysts at ICICI Securities see the opportunity of ~US$5bn+ export order for Hindustan Aeronautics throughout defence plane contracts for Egyptian, Malaysian and Nigerian air power. Finalisation of the order can result in additional rerating within the inventory, of their view. “Pickup in domestic ordering has allowed economies of scale, allowing for better price offering globally. Significant scale up of RoH and MRO revenues and experience with Russian platforms allow HAL a potential customer set in the Indian ocean region, MENA and Latin America,” they mentioned.
HAL additionally providing coaching to Nigerian military aviation commanders (part I and part II in Chetak helicopters) raises hope of it being one of many key contenders for Nigeria’s search of 12 twin engine assault helicopters. This can probably be US$400mn+ order for HAL LCH, the brokerage report added. “We have always looked at HAL as ‘the’ Defence Prime which can expand the Indian defence ecosystem along with its own platform sales. We estimate ~US$50mn – US$1bn of Indian origin products getting bunched up with US$5bn+ export order for HAL from these three countries,” analysts mentioned.
Make in India increase for HAL
The Ministry of Defence (MOD) lately accredited imposing restrictions on the import of 108 navy weapons and methods corresponding to next-generation corvettes, airborne early warning methods, tank engines and radars. All the 108 gadgets will now be procured from indigenous sources as per provisions given in Defence Acquisition Procedure (DAP) 2020. According to analysts, defence firms get the majority of their order and income from one buyer, the federal government. The choice that the Indian navy will rely solely on indigenous distributors for defence tools will assist HAL to get stability within the order e-book and predictability in money stream.
ICICI Securities maintains a ‘buy’ score on the inventory with a goal worth of Rs 2,618. “The biggest certainty to our valuation is the orderbook which is expected to cross Rs 1,000bn by FY22/23E – there are hardly any defence primes in the world that manufacture combat aircraft and have an equivalent book to bill,” it mentioned. The key threat, in line with the brokerage, is lack of diversification. HAL might have to consider enterprise diversification ultimately, it added.
(The inventory suggestions on this story are by the respective analysis analyst. FinancialExpress.com doesn’t bear any duty for his or her funding recommendation. Capital markets investments are topic to guidelines and rules. Please seek the advice of your funding advisor earlier than investing.)
Source: www.financialexpress.com”